The securities regulator is investigating several cases where property spruikers may be pushing investors into self-managed superannuation funds to buy real estate.

Greg Tanzer
, a commissioner at the Australian Securities and Investments Commission, said the regulator was looking at “a number of active" matters related to advertising campaigns by estate agents.

“We have a pretty active pipeline," Mr Tanzer told The Australian Financial Review shortly after ASIC widened its scrutiny of the fast-growing $500 billion sector to take in the general quality of advice and the size of schemes.

Under the proposal, advisers would be forced to warn potential DIY fund investors about the costs and risks of establishing a scheme, the duties associated with running a fund, the need to develop an investment strategy, the time commitment and skills required and the dearth of compensation available should investments turn sour because of theft or fraud.

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Mr Tanzer conceded ASIC was almost powerless to regulate savers who established schemes online with no advice. Several web services, such as ESUPERFUND, offer to establish DIY schemes, in some cases for free. “There is not a lot we can do about that as a regulator, other then deal with it through education initiatives," he said.

But the regulator played down the number of people who were establishing and operating funds with no advice. “It is far more likely people will have had some human intervention along the way," Mr Tanzer said.

Fears funds don’t understand risks

He said while the total amount of borrowing by self-managed funds was not a problem, the regulator was concerned about a small portion of funds not understanding risks of the strategy. “We are more worried as people approach retirement and are concerned that they may not have enough money, they may be tempted to over-leverage," he said.

The ASIC commissioner played down concerns raised by the SMSF Owners’ Alliance (SMSFOA) that the reduction in annual super contributions limits was prompting self-managed fund trustees to take bigger risks and borrow to buy assets in an effort to build up their super savings.

“I am not sure how much of that is really happening," he said.

Warnings should reduce activity

Mr Tanzer said he hoped warnings from ASIC that real estate agents would be breaking the law by recommending self-managed funds to investors without being qualified would reduce the activity. “I suspect [borrowing] is a marginal issue but one that needs to be watched," he said.

Earlier this year, ASIC made it clear it regarded people advising savers to set up a do-it-yourself scheme to buy property as providing financial advice and would require a financial services licence.

“By making clear that if spruiking was done in a way where it was giving advice you will need a licence, this should significantly deter people from this kind of activity," Mr Tanzer said.

SMSFOA executive director
Duncan Fairweather
said his organisation was concerned about borrowing by self- managed funds and called for a review of the practice. In 2010, the Cooper review of Australia’s retirement savings industry recommended a review of the sector be carried out in 2012, but it has never eventuated.

“It would be timely to have another look at borrowing by SMSFs," said Mr Fairweather.